« Ind. Courts - Perhaps we will get a better docket, and briefs (and other docs) readily accessible online? | Main | Courts - "Supreme Court Review: Campaign Cash, Controversy" »

Monday, July 12, 2010

Law - "Too Rich to Live? "

Supplementing this June 13, 2010 ILB entry, headed "Legacy for One Billionaire: Death, but No Taxes" (Ripped from the Headlines), the WSJ this weekend had a long story by Laura Saunders and Mary Pilon subttitled "The estate tax is set to come roaring back in January. That sets the stage for a perverse calculus: End it all—or leave a massive bill for your heirs to deal with." It begins:

It has come to this: Congress, quite by accident, is incentivizing death.

When the Senate allowed the estate tax to lapse at the end of last year, it encouraged wealthy people near death's door to stay alive until Jan. 1 so they could spare their heirs a 45% tax hit.

Now the situation has reversed: If Congress doesn't change the law soon—and many experts think it won't—the estate tax will come roaring back in 2011.

Not only will the top rate jump to 55%, but the exemption will shrink from $3.5 million per individual in 2009 to just $1 million in 2011, potentially affecting eight times as many taxpayers.

The math is ugly: On a $5 million estate, the tax consequence of dying a minute after midnight on Jan. 1, 2011 rather than two minutes earlier could be more than $2 million; on a $15 million estate, the difference could be about $8 million.

Of course, there is a "death incentive" whenever Congress raises the estate tax. But it hasn't happened in decades; the top rate has held steady or fallen since 1942, according to tax historian Joseph Thorndike of Tax Analysts, a nonprofit group. In fact, the jump from zero to 55% would be "the largest increase in a major tax that we've ever seen," Mr. Thorndike says.

That possibility presents a bizarre menu of options for wealthy older people—and their heirs. Estate planning was never cheerful, but now it is getting downright macabre, at least for the tax averse.

This is a really good article.

Posted by Marcia Oddi on July 12, 2010 10:07 PM
Posted to General Law Related